My alarm went off at 5am this morning (Friday March 3rd for future context) an hour earlier than usual. I got up and groggily made my way downstairs, (hand on railing, always have a hand on the railing when getting up at 5am), and made my way to Fionn’s room to wake him up. Fionn scratched his head and rolled out of bed, “is it time?”, he yawned.

“You bet buddy. We’ve got 20 minutes then we have to leave.”

20 minutes later at 5:50am we pulled into the Walmart parking lot, pulled out our camping chairs, and set ourselves up outside the main doors. About 15 minutes later a friendly Walmart employee came out and asked us the all important question Fionn and I had been waiting to hear:

“You are first in line, do you want the Neon or Grey controllers?”

I looked to Fionn, and his instant reply was “Neon”.

The employee handed us a blue ticket. We were the first to arrive and had secured ourselves a Nintendo Switch on launch day.

2 hours later Fionn and I were walking out of Walmart with our Nintendo Switch, a copy of “Zelda Breath of the Wild”, and a pro controller: $641.62 Canadian, of video gaming goodness.

Why am I sharing this money story? Many times, when I am talking to people about budgeting, I get the same immediate response:

“Oh, I have tried budgeting and I hated it. Budgets are no fun and don’t work.”

As someone who created some really horrible family budgets that didn’t work, I can absolutely agree, with one added twist:

“Budgets are too limiting and don’t work, if you don’t leave room for ‘fun money’ in your life”[Read more…]

I will talk more about this in the video segments, but this is THE book that has had the most impact on how I relate to my money. It was “Your Money or Your Life” that finally kickstarted me in working with Ashlea to turn our money-life in a new direction and get us where we are today. Many of the lessons I learned in “Your Money or Your Life” have also had an effect on how I have built and run my business.

Of course I haven’t read “Your Money or Your Life” in 10 years, so maybe my feelings about it have changed. I am not sure, so I am re-reading the book now, and shooting videos of my biggest take-aways from each chapter. All of those take-away videos can be found in this blog post, so make sure to come back and watch the newest videos as I post them. I will post each updated chapter review with the date the videos were added so you can easily use the table of contents to jump to the videos you haven’t watched yet.

This is a new experiment in my business, so if you find this content valuable let me know by leaving a comment on this post, or by emailing me at jeremie@jeremiemiller.com.

All of the air rushes out of your lungs and you feel breathless, like you just took a hit to the solar plexus, looking at the final number.

Is it really possible that you owe that much? And you utter the fateful words:

“The tax man just took my money”

This is a common experience for entrepreneurs, whether paying quarterly taxes or in the months of March and April as tax season arrives and the big, and often surprising tax bills confront your business, your personal life, and your finances.

This experience is often followed by people explaining how their tax bill was bigger than expected, or that they had not saved any money for taxes, and that now, they are going to have to use their credit card, line of credit, or home equity loan to cover their tax bill.

Which, means that the next year will be spent paying off that debt, and there will be no money saved for the current year’s tax bill, and the cycle continues.

Even worse, when you pay your taxes with debt, now you ARE losing extra money that DID belong to you, when you pay interest to the bank.

Remember when you had a job

The reason saving money for taxes is so difficult as an entrepreneur, is that before starting your own business, some one else was handling the taxes for you. Every time you received a paycheck your employer had already removed the government’s cut from your earnings. You didn’t have to plan for your taxes because someone else was handling it for you.

When you run your own business, and get 100% of the money from your client, with no deductions, all that money is seductive. You feel the full accomplishment of earning that money, and immediately want to start using that full amount to cover expenses and pay yourself. It is a fabulous (but dangerous) feeling.

However, as a business owner you have to remember that you are both employer and employee. You have to remember that your business is a separate entity from you and your business needs to make decisions with that income before you do, decisions like taking taxes from the business and “off your paycheck” before you start spending your hard earned money.

How do you stop this endless cycle of always being behind on your taxes?

The first step, and not necessarily an easy one, is to stop feeling guilt (or any other nasty emotions) about your situation. Not having money saved for business and personal taxes is not a unique situation, most (if not all) entrepreneurs, including me, have had this experience at some point and had to work through it.

So, stop judging yourself, and focus on leaving the past behind and working on a solution that starts today.

The second step is to reframe how you look at the money you pay for taxes and realize the truth:

You never owned the money the government takes, it always belonged to them.

And, if you are spending that tax money every month, to help cover expenses, run your business, and pay yourself your business and personal finances need a fix. Remember, your situation is normal, no judging, but you need to start being more honest about how your money is flowing through your business to your personal life and adjust your current money habits to reflect the truth of your business and taxes.

How to start a new money habit that includes taxes

Here are ten steps you can use to change your relationship with your taxes:

Talk to your accountant or bookkeeper and get the amount you paid for business taxes last year as a percentage of your overall business expenses.

Review your personal taxes from last year and get the amount you paid for personal taxes last year as a percentage of your income.

Open up a separate bank account for business taxes.

Open up a separate bank account for your personal taxes.

Every time a client pays you, take your business tax percentage from that income and put it in your business tax bank account.

Pay yourself.

Use the remaining money to cover your business expenses, business savings, etc.

Take your personal tax percentage from that income and put it in your personal tax bank account.

I don’t make enough money to do this, it won’t work

If crunching these numbers won’t work for you, if taking money off for taxes means you don’t have enough money left to cover your business and personal expenses, then you need to make some changes to how you are spending money in your business and personal life.

Because, the truth is, you are ALREADY following these steps, but, instead of taking this money out every month, and learning to live on what is left over, you are overspending and then covering your taxes with debt. Then you are spending EVEN MORE money on the interest on that debt.

So, although this may not feel possible, you will actually be making more money in your business by following these 10 steps, because you won’t be paying interest on your tax debt.

All right, I am on board, but what if I am already in debt for back taxes

Trying to save for taxes for the current year, while also paying off tax debt from past years is a big challenge that will probably require some cuts in your current spending so you can cover your past debt and still save for your current taxes.

Here are some suggestions on how to save for taxes and pay down your tax debt:

Follow the ten steps above and save money for your current tax year.

Review your budget (both business and personal) and look for places you can cut spending.

Take the money from those spending cuts and redirect it towards your tax debt.

By following these suggestions you will continue to save and be able to pay for your current taxes with cash (which is an amazing feeling) while putting as much money as possible towards your past tax debt. If you stick with these suggestions, over time you will pay off that past tax debt and begin a cycle of paying for your current taxes with cash.

Why don’t I pay off the debt (and save interest) first?

What I have found is that paying for the current year’s taxes with cash, even if that means paying interest on past debts longer, is an empowering experience that will give you a huge feeling of accomplishment as a business owner.

Every time you spend money on the past tax debt you are expending your time and energy on dealing with “old money”, you are working on the past state of your business and this is draining. You put all your money towards your debt, then look at your tax savings account and see it is still at zero, and feel like you are never getting ahead.
If you first put money in your tax savings account, and then use extra money to pay off the debt, you are now expending your time and energy on “new money” and seeing that money accumulate and make a difference in the future state of your business. So, even though you will end up spending more on interest payments on your old tax debt, you are gaining the benefit of working towards the future of your business.

Get started right now

Whether the next tax season is 12 months or only 3 months away, get started now, even a small amount of money saved towards your taxes will break the cycle and shift your focus towards the future of your business.

Have an honest conversation with your business, find your tax percentages, and get started saving so you can pay this year’s taxes with cash instead of debt.

The way this feels, and the confidence this will give you will make a big difference in how you continue to build your business.